Over the last several years, the left has bombarded us with a wish list of big projects. The Green New Deal, universal health care, free college — all part of its plan to increase our dependency on big government.
In this talk about new programs, a question never really gets answered — how do we pay for all of it?
Some say to continue borrowing against the full faith and credit of the United States. And for the last 20 years, the federal government has done just that — spending trillions more than collected and taking on enormous debt. Because interest rates on that debt have been historically low, the borrowing and payments on that debt have been manageable, and the economy hasn’t suffered.
Those days are over. The United States has $31 trillion in debt that needs servicing. This means that — at the very least — the government must pay interest on that outstanding debt. When interest rates were low, service on that debt wasn’t an enormous concern. But exploding interest rates mean higher interest payments.
Payments on the interest for the debt are expected to exceed $700 billion by 2025 — rivaling the budget for the Department of Defense. Payments on the debt will soon become one of the largest outlays of government spending and will continue to spiral upward.
Just recently, the Congressional Budget Office said that growth in interest costs and mandatory spending will result in federal debt held by the public rising from 98 percent of the gross domestic product in 2023 to 118 percent in 2033. The more money spent on interest payments on the debt, the less money is available to fund new projects.
Cue the wealth tax: Sen. Elizabeth Warren, D-Mass., has sponsored a bill called the “ultra-millionaire tax” that will apply a 2 percent annual tax on the net worth of households and trusts between $50 million and $1 billion. Though only enjoying limited support in Congress, the idea of instituting a wealth tax is gaining support, and — as the nation sinks deeper into debt — calls for new forms of taxation will only increase.
The left needs new sources of revenue, and its plan to find that money is simple. Tax the assets of the ultra-wealthy and then gradually expand those assessments to more and more people. After implementing wealth taxes, they can be enlarged to include households with fewer assets. And even if Congress doesn’t amend an applicable law, President Biden or another Democratic president could find creative ways to use the regulatory process to impose wealth taxes.
But taxing the ultra-rich to fund these programs won’t be enough. Even a 100 percent tax on billionaires wouldn’t generate enough new revenue to support the programs.
What happens when the current iteration of the “ultra-millionaire tax” isn’t enough? Just lower the net worth amount for triggering the tax. Instead of $50 million, lower the net worth to $10 million. Alternatively, apply the tax to real property valued at more than $5 million. The possibilities are endless.
Legal problems exist with these types of taxes, and it’s important to fight efforts to enact and legitimize them. Leftists have taken initial steps to implement wealth taxes and have had some success. For example, the 9th Circuit Court of Appeals recently ruled that a couple could be subject to taxation on their ownership stake in a foreign corporation. It didn’t matter that the couple never received any dividend payment. Nor did the couple sell their shares for more than they paid (and thus realized a gain).
Previously, to be considered income, a realization event had to occur. Now, simply owning a type of stock constitutes income.
The couple is appealing this case to the Supreme Court, which has yet to decide whether it will hear it. If the decision is not overturned, legislatures — and possibly government agencies — will have legal cover to expand the definition of income. Individuals will no longer have to realize an actual economic gain to be liable for taxes.
Senator Warren will rejoice.
